For foundations, the path to achieving racial equity starts with a simple choice: Do you use your endowment to maintain the status quo, or do you align your investments with your mission?

When I came to Winthrop Rockefeller Foundation (WRF) in June 2007, Chief Operating and Financial Officer Andrea Dobson shared that she wanted to transform our endowment. She envisioned aligning our mission and financial investments by increasing capital access to low-wealth communities, and identifying investment firms owned and/or led by women or people of color. She also envisioned investing in venture strategies that provide capital to racially and ethnically diverse entrepreneurs, and to women.

Andrea’s vision got us thinking critically about what we could achieve through social equity investing, an impact investing strategy that helps investors match their endowment portfolios with impact goals, such as advancing access to quality education, economic mobility, affordable housing, financial inclusion, and racial and gender equity. Today—after many years of board education, debate, discussion, and changing our investment advisor to Cambridge Associates—close to 36 percent of our endowment, amounting to more than $47.1 million, is mission aligned and invested with firms led by people of color or women.

Over the years, many people have asked me why more foundations aren’t using their endowments to advance racial equity and how WRF has come so far. I tell my colleagues in the philanthropic community that our journey started with a simple choice to align mission and investments, along with discipline, courage, and collaboration between board members and investment advisors. We drew on foundation colleagues leading by example, an extensive body of literature on how to do it, and the expertise of investment managers who could help make it happen in partnership with our board.

Yet my response and the vast library of resources I share are often met with skepticism. They also reveal hidden biases. Here’s a look at two common ones and how we can leave them behind.

Bias #1: Social Equity Investing Requires Sacrificing Returns

We’ve all heard this before in the impact investing debate. But there is no strong evidence to support the assertion that social equity investing must sacrifice returns.

In fact, although WRF’s portfolio includes investments that prioritize deep impact over returns, several of the social equity investment managers in our portfolio are top-quartile performers. We are still early in building out our private social equity impact investment program, but are encouraged by initial returns in areas such as education and community development.

We are taking advantage of the opportunity to both grow our endowment and funnel more capital into underserved communities for affordable multi-family housing, increased access to quality education, and other systems that support equity. We also support local/regional community development financial institutions (CDFIs); WRF does all of its banking with Southern Bancorp and has purchased certificates of deposits with Hope Community Credit Union.

In all these activities, our team follows WRF’s Investment Policy. We are making money on our social equity investments so that we may continue our grantmaking, and we do not make special provisions for our social equity managers. If there is a firm that does not perform according to our policy, we drop them from our portfolio. We have ups and downs like all other investors, but there is money to be made in social equity investing and in expanding our portfolio.

Of course, the financial benefits of social equity investing aren’t isolated to WRF’s own experiences. Between 2013 and 2018, The Russell Family Foundation moved from 7 percent to 74 percent in mission-aligned investments, and the portfolio outperformed its blended benchmark by nearly 3 percent annualized. Investors like us have also made the business case for racial equity investing, noting that inclusive growth and investments capitalize on some of the fastest-growing demographic trends. They may also reduce long-term public costs in sectors such as health care and education, where outcomes are deeply tied to community wealth and other socially determined factors.

Read the rest of Sherece Y. West-Scantlebury’s article at Stanford Social Innovation Review